Pre-Open Data
Key Data for the Week
- Monday – AUS – MI Inflation
- Tuesday – AUS – RBA Cash Rate Decision
- Tuesday – US – Trade Balance
- Wednesday – US – FOMC Meeting Minutes
- Thursday – AUS – Trade Balance
- Thursday – EUR – Retail Sales
- Friday – AUS – RBA Stability Review
Australian Market
The Australian sharemarket weakened slightly on Friday, down 0.1%, in a mixed session of trade. The Information Technology sector led the gains, up 1.3%, followed by the Energy sector, which added 1.2%. Over the week, the local ASX 200 rose 1.2%, its third consecutive week of gains.
Mining heavyweights lifted the Materials sector on Friday; Fortescue Metals advanced 1.9% and BHP added 1.2%, while Rio Tinto closed up 1.0%. Gold miners were mixed; Newcrest Mining rose 0.7%, while Evolution Mining and Northern Star Resources eased 1.6% and 2.2% respectively.
The Energy sector advanced despite weaker oil prices. Santos and Woodside Petroleum gained 2.1% and 1.8% respectively, while Beach Energy rose 0.3%. However, Ampol slipped 0.4% after the company announced it has resolved its fuel supply agreement dispute with petrol station operator EG and will be the exclusive supplier to EG in Australia.
Weakness amongst the major banks weighed down the Financials sector. ANZ was the main laggard, down 1.5%, Commonwealth Bank and Westpac both shed 1.2%, while NAB slipped 0.1%. Insurers were mixed; Insurance Australia Group and Suncorp both gave up 0.2%, while QBE Insurance rose 0.7%.
The Australian futures market points to a 0.25% rise today.
Overseas Markets
European sharemarkets advanced on Friday, boosted by strong gains in the Materials sector. By the close of trade, the STOXX Europe 600, UK FTSE 100 and German DAX all gained between 0.2% and 0.5%.
US sharemarkets rose slightly on Friday. Real estate stocks were the top performers; Digital Realty Trust and Equinix both gained 2.9%, while Prologis lifted 2.7%. By the close of trade, the S&P 500, NASDAQ and Dow Jones all rose between 0.3% and 0.4%.
CNIS Perspective
With emerging markets heavily focused on the Russia/Ukraine fallout, our iron ore rival Brazil has gone unnoticed in the sector.
The largest economy in Latin America has a remarkably similar export sector to our own, with strengths in commodities and agriculture. Iron ore is its single largest export.
Much like all other global economies, Brazil is currently experiencing fierce inflationary pressures, with a current annual inflation rate of 10.54%. Australia’s inflation rate is 3.5% by comparison.
The global commodities rally, a stronger Brazilian Real against the US Dollar and the worst drought in almost a century have contributed to rising prices.
As of last month, the Banco Central do Brasil raised the domestic interest rate to 11.75%, in an effort to further strengthen the Brazilian Real, attract foreign investment and stabilise the current inflationary environment. In addition, the central bank of Brazil has signalled another 100bps rate hike (1.00%) to come at their next meeting.
With volatility in the financial markets and rising interest rates in other major economies, the attractiveness of this interest rate is diminished, but there is an advantage to being the first mover.
Adding to this is the strength of iron ore, trading at US$154 per tonne, $44 above its 10-year average, given the trades made in Brazilian Real.
The strength of the resulting Real reduces the impact of inflation on imported goods and justifies the continued aggression of their central bank, highlighting the beneficial impact of rising rate movements.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
Disclaimer
The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.
Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814.
